How to record a deposit payment to a supplier

Some suppliers require your law firm to make an upfront deposit payment before you use their services. These amounts are credited to you and are eventually applied to the bills that the supplier issues to you. 

To properly record such payments, you should

1. Create an account of type Asset (Current) in your Chart of Accounts for those deposit payments. You can use the supplier's name in this account to identify the nature of the deposit (e.g., Teranet Deposit Account)
2. Once the deposit account above has been created, you should match the transactions representing the deposit payment with this account. This results in increasing the balance of the deposit account. You can also create a Transaction Rule to automatically match all payments to the supplier to this deposit account.
3. When the supplier issues a bill, you should add the bill and add a payment to it, and on the bill payment, select this deposit account as the source of the payment.

In the method above, the deposit account that you create, acts similar to a bank account, in that the amounts that you pay to the supplier as deposits, will get deposited into this account which are then later used to pay the supplier's invoices. The balance remaining in this deposit account will show on your Balance Sheet in the Assets section.